21 Jun 2011
“The only way to make sense of Dubai is to never forget that it isn’t real. It’s a fable, a fairy tale, like The Arabian Nights.”
This is how Vanity Fair’s A.A. Gill opens his scathing review of the emirate. Indeed, media outlets have spared no reference, quipping about “oil-drenched hubris” and dubbing the emirate “Icarus” – experimental, foolish and destined to crash.
Is there somewhere else in the world also called Dubai? Did Mr Gill ever look into the place that one of my colleagues calls the Manhattan of the 21st century?
Yes it was caught short. Yes it made mistakes in handling its own share of the financial crisis.
But the spirit that built Manhattan in the early and mid part of the 20th century is the same spirit that has transformed Dubai from a place scarcely anyone had heard of into a bustling emirate that scarcely anyone is unaware of. Mr Gill should stick to restaurant reviews – and at home.
Of course the place was bruised a little but it’s a mark of the irrepressible character of Dubai that it has bounced back. It’s a little wiser than before, sure. But it still has the vim, the vigour, and the vibrancy that has made it a world player in so many areas.
Although, the financial crisis did turn up the heat on Dubai’s debt-laiden wings, the emirate has defied grim predictions, having already more that regained ground lost during the crisis.
Just as Dubai was coming back into full stride, a seed of unrest in Tunisia came into full bloom across the region, heralding what we now call the Arab Spring. From Morocco to Iran, the MENA region erupted. Both those countries already simmering with internal conflicts– Egypt, Yemen, Syria – and those considered less prone to unrest – Oman, Saudi Arabia – were shaken by protests.
So where does Dubai stand in post-global financial crisis, current-regional political crisis environment?
Across sectors, indicators seem positive.
For the banking sector, the Arab spring seems to have been a blessing. According to the IIF (International Institute of Finance), unrest may have encouraged investors to divert their holdings to the UAE. This year to March 2011, the country a whole has seen its deposits rise more than 14% — a significant boost for such a short time. Of course, caution is crucial. Although deposits increased roughly 7.5%, loans increased by 2.2%. This indicates that banks may be biding their time for a bit. Still confidence overall in the UAE, especially Dubai, seems strong. The Dubai Department of finance announced last week, for example, that its $500 million bond issue was very well taken by international investors, raising more than $1.8 billion.
This isn’t a sympathy vote. Investors are far too savvy for such risky emotions. This was a whopping vote of confidence in Dubai.
In real estate, one of the pillars of Dubai’s economy, numbers have been on the up. Naturally, the global slowdown put a dent in demand and knocked prices down a bit. Now, though, price retreats have slowed dramatically: just 1.2% in May. Despite this doom and gloom, rents remain substantially higher in Dubai than almost anywhere in the region. Globally, Dubai is still one of the most desirable places to have an office, commanding higher rents than New York City, Singapore, Paris.
Moreover, downward pressure on real estate prices over the past few years isn’t necessarily a bad thing. As rents dip, Dubai will become more affordable to greater numbers of people, many of whom were forced to seek housing options further afield in the boom years.
Indeed, the gilded properties upon which the emirate built its culture – “7-star” as it were – will continue to be central to Dubai’s image. Despite the trials of the economic crisis, the emirate is still the most recognized brand in the region – and the world. As the global economy recovers, Dubai’s growing affordability and name-recognition could make it a magnet for companies looking for new office space. Real estate deals are already picking up again. In the first quarter of this year they hit 8 billion dollars, a 20% increase compared to the previous quarter.
In short, Dubai’s runaway success was ironically making it harder for the emirate to maintain one of its prime aims – that of making itself an ideal and affordable place to do business. The price corrections helped Dubai to anchor itself again in the real world – and the real world has responded by beginning once more to anchor itself, its businesses, its regional headquarters and its entrepreneurs in Dubai.
The effects of the Arab Spring are only set to feed these trends. In Dubai – and the rest of the UAE – political stability has proved to be key, allowing economic growth to continue uninterrupted by unrest while other countries wrangle with their political troubles.
It is a similar story in the tourism market.
Unrest hurt tourism in countries like Tunisia – where visitor numbers more than halved this year– and Egypt – whose visitors are down by 35% on an optimistic assessment. In Dubai? Well, the total number of visitors expected to hit just under 8 million, a 17% increase from last year. In fact – here’s looking at all of you – nearly a million are expected from England alone. Tourists are set to spend more, too, with total spending set to hit around 7.5 billion dollars. As far as tourism spending is concerned, that will make Dubai’s growth rate among the fastest-growing in the world, led only by Istanbul and Barcelona.
With the widest selection of hotel rooms, from two star offerings to the lush Armani Suites at the Burj Khalifa, it is also the most popular place for visitors to stay, which they have been doing. Both the number of visitors and the average number of nights each visitor stays increased last year, leading to a 6% rise in hotel revenue to $1.87 billion. Even with a 7% increase in the number of hotel rooms, occupancy rates remained buoyant. In a place where tourism makes up just under one fifth of the economy, this is all good news indeed.
And how could anyone fail to be impressed by the fountains at the foot of Burj Khalifa – Dubai’s Dancing Waters they should really be called. “Best in the world” is a phrase far too often trotted out to describe attractions, yet the combination of music, lights and multidirectional fountains is as yet an unequalled monument of magnificence.
The economic environment in the region also offers good news to Dubai’s growing industrial potential. Look at the aluminium industry. Dubai Aluminium, or Dubal, has seen steadily rising demand in recent years as its neighbours gear up for massive construction projects. In Saudi Arabia, for example, the government announced plans to spend more than $82 billion on new construction to support the country’s growing population and to support social needs. In Qatar, officials are planning more than $50 billion for stadiums and infrastructure in preparation for the 2022 World Cup. In addition, regional projects like the GCC railway are set to increase demand for the metal. Emirates Aluminium, a partnership between Dubal and Abu Dhabi’s investment firm Mubadala, has recently announced plans to invest as much as $4.5 billion to expand operations to meet higher demand.
Meanwhile, trade, logistics, and transport are booming. Dubai International one of the world’s four busiest airports, handling over 47 million passengers last year. Al Maktoum International Airport in Jebel Ali began cargo services last year. A terminal designed to handle up to 80 million passengers, and eventually many more than this, and 10 million tonnes of cargo per year is slated for completion by 2020. This project in turn, is part of the Dubai World Central, a $33 billion development centred on this on the airport, the Jebel Ali Port, and a free zone.
And is there anything more that could be said about Emirates. In a world where the aviation industry is struggling; where IATA’s forecast for global profits has been slashed, Emirates has xx planes on order and recorded a 50% increase in profits in the year up to March 31 of this year to reach $1.5 billion. The average seat factor on its 111 routes increased to 80%, the highest in its history, according to the Financial Times on May 11. At the end of last year, the airline’s order book stood at 201 widebody aircraft (including 76 A380s, 48 B777s and 70 A350s . Go fly your kite somewhere else Mr Gill while Dubai does the real flying.
Progress across these sectors – banking, real estate, tourism and industry – all point to the fact that Dubai, and the rest of the Emirates at that, has regained its focus, regrouped its forces and its strength and, far from being finished, is intent on shouting loud and clear to the world with characteristic enthusiasm “You aint seen nothing yet.”